Editorial: Brash's panel must be broad-based

In 2006, Don Brash used the National Party leader's annual Orewa speech to accuse the Labour-led Government of resting on its good fortune when it ought to have been taking steps to improve the economy's capacity and productivity.

He was not alone in pinpointing the issue. A year earlier, Helen Clark had made the need to lift labour productivity the main theme of the Prime Minister's Statement to Parliament. Her Finance Minister, Michael Cullen, agreed, saying that lifting the rate of productivity growth remained "the big nut to crack" in boosting the economy.

But for all its talk, the Clark Government offered little that was concrete. Now, Dr Brash gets his chance as the head of a taskforce charged with increasing productivity and closing the income gap between New Zealand and Australia by 2025.

The taskforce is welcome. For more than 20 years, Australia has placed a strong emphasis on productivity. It was recognised in the compulsory superannuation arrangements and in the Australian Productivity Commission.

This was formed as an "independent research and advisory body on a range of economic, social and environmental issues affecting the welfare of Australians". It has been highly successful and enjoys cross-party support. But if it is the inspiration for the New Zealand taskforce, it is, regrettably, not the precise model.

That possibility was ditched with the appointment of Dr Brash, whose excellent credentials as a former Reserve Bank Governor are compromised by his political partisanship.

This will make it harder for the taskforce to gain credibility. Therefore, it is especially important that the yet-to-be-announced members come from different parts of the political spectrum. If so, the taskforce stands a stronger chance of making a significant contribution to the creation of a more balanced and robust economy, and long-term prosperity.

The size of its job is indicated by the fact that, while productivity in New Zealand and Australia was on a par 40 years ago, Australia's is now about a third higher, as are incomes there. Migration across the Tasman has been an obvious consequence. The reasons for the slide have been much researched.

A key factor seems to have been capital shallowness; on average each New Zealand worker has had less plant and machinery to work with. While this country has had plenty of noses to the grindstone, Australia has invested in a superior grindstone.

But improving productivity will involve myriad matters encompassing skills, strong investment, clever innovation, smart decision-making and motivation. In New Zealand's case, these are all the more important because productivity is not helped by a small population and remoteness from large markets. Therein lies the importance of leading-edge information and computer technology, an area in which we have lagged behind Australia.

Many of the most important decisions that will underpin improved labour productivity lie with the private sector. But governments have a role to play in infrastructure, the teaching of skills and in encouraging a culture of saving, thereby providing a local and cheaper source of investment capital. They can also remove impediments to the private sector in areas such as tax, regulation and foreign investment.

Australia's Productivity Commission has ventured far and wide in seeking to provide the best canvas for prosperity. One of its recent inquiries found book prices were far too high because foreign versions of any book published in Australia cannot be sold there.

Dr Brash's taskforce will start with matters of broader brush. Some of its findings will doubtless be unpopular. But in time it can establish a high degree of credibility by supplying a high standard of practical advice.